The conversation doesn't seem to have much to do about photography, but interesting nevertheless.

I always felt at the time of the GFC that the thousands of indivual borrowers who had accepted loans for houses simply because the loans were offered by the banks and made so easy to obtain, are largely to blame for the problem. What happened to personal responsibility?

I'm fortunately debt-free, but even if I wasn't, I'd never take out a loan to buy a camera, for example. (See! By using the word 'camera' I've now made this post relevant to a photographic forum ).

I understand the mortgage default situation in America was exacerbated by the fact that many States in the US, including California, have a non-recourse situation regarding mortgage defaults, which means in effect that the borrower who finds himself unable to make the monthly repayments on the million dollar house he has bought, with perhaps no initial deposit made, can simply hand in the keys to the bank and walk away. The bank then carries the loss when the property is subsequently sold for less than the value of the outstanding loan.

What a great situation for the greedy individual. "Hey! I've got no savings and no assets, but my bank is willing to lend me a million dollars to buy a luxury house, without deposit. Heck! I can't go wrong."

At the great risk of beating this dead horse, I just wanted to add one comment. A couple of contributors to this thread mentioned the irresponsible behaviour of individual mortgage borrowers. There is no doubt that many of these people took ridiculous risks when signing up for these mortgages, but to suggest that the world's financial troubles were caused by this behaviour is a little hard to swallow. Many deregulatory steps were taken over the years that set the stage for all of this to happen. It's politicians who passed those legislations but it was all done because of the lobbying by the financial industry. The revolving door between Wall Street and Washington (and other places) is incestuous, at best. When I read that it was government action that was at the root cause of the collapse, I can only laugh. It was financiers from Wall street who held the jobs in the various government departments that gave rise to the changes in legislation. We ended up with deregulation in the financial markets because the people in those sectors wanted new ways to make a buck. The change in financial regulation that made it possible for mortgage brokers to sign up unqualified borrowers is only the last link in the chain. It was insanity to allow them to offload the risk in the manner that it was done. They handed the keys to the vault over to snake oil salesmen. To blame the financial un-sophisticates at the bottom of the pyramid for signing up for mortgages they could not afford, using catchwords like personal responsibility, is a very easy but unconvincing way of avoiding the really huge stinking elephant in the room.

At the great risk of beating this dead horse, I just wanted to add one comment. A couple of contributors to this thread mentioned the irresponsible behaviour of individual mortgage borrowers. There is no doubt that many of these people took ridiculous risks when signing up for these mortgages, but to suggest that the world's financial troubles were caused by this behaviour is a little hard to swallow. Many deregulatory steps were taken over the years that set the stage for all of this to happen. It's politicians who passed those legislations but it was all done because of the lobbying by the financial industry. The revolving door between Wall Street and Washington (and other places) is incestuous, at best. When I read that it was government action that was at the root cause of the collapse, I can only laugh. It was financiers from Wall street who held the jobs in the various government departments that gave rise to the changes in legislation. We ended up with deregulation in the financial markets because the people in those sectors wanted new ways to make a buck. The change in financial regulation that made it possible for mortgage brokers to sign up unqualified borrowers is only the last link in the chain. It was insanity to allow them to offload the risk in the manner that it was done. They handed the keys to the vault over to snake oil salesmen. To blame the financial un-sophisticates at the bottom of the pyramid for signing up for mortgages they could not afford, using catchwords like personal responsibility, is a very easy but unconvincing way of avoiding the really huge stinking elephant in the room.

There are two really huge stinking elephants in the room. Those who were irresponsible in offering clients something that they should have known was not affordable, and those who bought something that they should have known was not affordable. There was probably carelessness on both sides.

The snake oil salesmen only have those that are willing to buy snake oil as customers. In the end, I do agree that the bankers hold the most responsibility because they should be the experts that know. But, the person signing the contract has responsibility in the matter too.

And the govt that felt some companies were too big to fail has also failed all of us. Capitalism should have watched from the sidelines as these bad investment decisions get flushed through the system. Boards of directors would have resigned and new emerging companies would be formed to fill the void.

What we got was just the opposite. A huge step towards socialism and half the population with their heads stuck in the sand trying to place blame everywhere except where it belongs. Bail them out.....what a failure. This failure needs to have consequences, and that is the removal of the POTUS.

In the UK Gordon Brown the PM and former chancellor could have regulated the banks but chose not to. He thought he could tax the bank's profits but in reality he was taxing their debts. Watching from the sidelines is what he did.

To blame the financial un-sophisticates at the bottom of the pyramid for signing up for mortgages they could not afford, using catchwords like personal responsibility, is a very easy but unconvincing way of avoiding the really huge stinking elephant in the room.

That seems a rather incongruous argument to me. I'm under the impression that democracy and freedom is all about empowering people, and giving them the opportunity to make their own decisions that affect their well-being and their future.

You seem to be implying that a people who have been given the formidable right to personally own firearms on the understanding that such firearms will be used responsibly, should not be held responsible for agreeing to unaffordable loans. I'm getting scared already.

That seems a rather incongruous argument to me. I'm under the impression that democracy and freedom is all about empowering people, and giving them the opportunity to make their own decisions that affect their well-being and their future.

Maybe so, but it's still illegal to steal, kill, or buy and sell human slaves. We accept all kinds of limitations on our "freedom" as a reasonable price for living in a civilized society (yobs notwithstanding). Not allowing extremely powerful financial institutions to do things that are so stupid that they harm the entire globe may not be such a bad thing. And anyway, electing government representatives to curb the power of others is exactly that, a form of that very empowerment that controls our well-being and future, even though sometimes it conflicts with the wishes of others. Was it a violation of slave traders private commercial interests to abolish the slave trade. Yup, in that strict sense, it most certainly was.

You seem to be implying that a people who have been given the formidable right to personally own firearms on the understanding that such firearms will be used responsibly, should not be held responsible for agreeing to unaffordable loans. I'm getting scared already.

In the strict sense that both parties acted stupidly, I would agree as well. But if you mean to imply that both parties are comparably responsible for the GFC, that's where we would part company, I'm afraid. A semi-employed twit who takes out a $750,000 mortgage to buy a monster home on whose payments he will never be able to afford is an act so spectacularly stupid it's beggars belief, and I am unable to have sympathy for the self-imposed aggravation that results from it. But that guy does NOT have lunch with central bankers, he did NOT sit at the AIG board meetings, and he did NOT lobby for the financial industry deregulation that allowed snake oil salesmen to sell his mortgage to another party after pocketing the transaction fees, while not caring about the disposition of that loan. That's irresponsibility of another order. Those actions, enabled by people who all knew better, created the climate for the GFC (among other things, I'm sure, I'm no expert). I don't think it makes sense to compare their actions. The guy who bought the house was just a small-time moron. The guys who enabled the entire house of cards all drank the same kool-aid probably because they were all hoping to line their pockets with transaction fees in one form or another.

In the UK Gordon Brown the PM and former chancellor could have regulated the banks but chose not to.

Yeah, 'cos every bugger was telling them that regulating the banks was wrong, and the market would sort things & there was no need for state interference. The banks & Tories were moaning about what regulation they did put in place. No one comes out of this mess smelling of roses, 'cept those politicians & economists who argued for greater regulation & were ignored or laughed at.

There are two really huge stinking elephants in the room. Those who were irresponsible in offering clients something that they should have known was not affordable, and those who bought something that they should have known was not affordable. There was probably carelessness on both sides.

Nope ... missing the point entirely.

What was the problem was the unregulated "shadow" banking system where the markets for instruments like "credit default swaps" grew exponentially and totally unregulated ... because they were neither securities nor insurance products ... (yeah, right.)

Mortgage excess was and is real, but that's not the real issue that sent the world's financial system into a tailspin.

In the strict sense that both parties acted stupidly, I would agree as well. But if you mean to imply that both parties are comparably responsible for the GFC, that's where we would part company, I'm afraid. A semi-employed twit who takes out a $750,000 mortgage to buy a monster home on whose payments he will never be able to afford is an act so spectacularly stupid it's beggars belief, and I am unable to have sympathy for the self-imposed aggravation that results from it. But that guy does NOT have lunch with central bankers, he did NOT sit at the AIG board meetings, and he did NOT lobby for the financial industry deregulation that allowed snake oil salesmen to sell his mortgage to another party after pocketing the transaction fees, while not caring about the disposition of that loan. That's irresponsibility of another order. Those actions, enabled by people who all knew better, created the climate for the GFC (among other things, I'm sure, I'm no expert). I don't think it makes sense to compare their actions. The guy who bought the house was just a small-time moron. The guys who enabled the entire house of cards all drank the same kool-aid probably because they were all hoping to line their pockets with transaction fees in one form or another.

I'm certainly not willing to pretend I am an expert on these matters, and I think it's quite likely that the collapse of the housing bubble was not the cause of the GFC but one of the consequences of the GFC, which had other, deeper underlying causes.

The general principle I adopt on all complex matters, including the technical aspects of image making (got to keep some connection with photography, however tenuous ), is, 'Does it make sense?' 'Can it be explained in the language of the intelligent layperson?'

On the one hand, there are people whom you describe as stupid, who accept loans that they should know they cannot ever repay. On the other hand, there are much more sophisticated investors, whom you would probably not describe as stupid, but who nevertheless trust their investment advisors who may recommend unbelievably complex financial arrengements which may have been designed by mathematicians with PhDs, and which neither the investor nor his advisor understand, but have faith in those who appear to be more knowledgeable, just as your stupid, unsophisticated home buyer has faith in the astuteness of the bank advisor who approves his loan for the million dollar house.

This is why I think that ultimately the individual must take responsibility for his own actions and be less ready to blame others.

I think it was Albert Einstein who made the very wise comment to the effect, 'Don't trust any theory that cannot be explained in simple terms.'

For all those who prefer to blame the "little guy," let see the following parallel:

Say a guy in a white coat and a stethoscope around his neck stops you on the street and starts peddling a certain "wonder drug" or vitamin or whatever. Most reasonable people would be suspicious and probably refuse, assuming he is what he looks like, a quack doctor. Very few would fall for it, but there will be some. And of course, they would have only themselves to blame.

But lets assume the next day you go visit your family doctor, and to your surprise, he starts peddling the same. Most reasonable people would shake their heads in disbelief that the doctor they knew for years has stooped so low. At this point, a few more people might fall for it. And again, they would have only themselves to blame.

But then, next week, you go to a hospital, and to your astonishment, you see every doctor there is peddling the same thing. At this point you start to wonder are you going crazy or the world is. You come home, turn on a TV and see every TV station, every anchor, every pundit, even Surgeon General is talking about it, promoting it. You finally realize it must be you, and decide to give in and go for it. And you would be in a good company, you think, as every friend, every neighbor, every in-law, everyone you ever met even is telling you the same thing: they are doing it.

You see where I am going with this parallel: can you really blame the little guy for this mass delusion? Was there ever anyone to stand up and warn everybody, especially the little guy, that this must be a lunacy? Any pundit? Any politician? Any Republican or any Democrat? Anyone?

For all those who prefer to blame the "little guy," let see the following parallel:

Say a guy in a white coat and a stethoscope around his neck stops you on the street and starts peddling a certain "wonder drug" or vitamin or whatever. Most reasonable people would be suspicious and probably refuse, assuming he is what he looks like, a quack doctor. Very few would fall for it, but there will be some. And of course, they would have only themselves to blame.

But lets assume the next day you go visit your family doctor, and to your surprise, he starts peddling the same. Most reasonable people would shake their heads in disbelief that the doctor they knew for years has stooped so low. At this point, a few more people might fall for it. And again, they would have only themselves to blame.

But then, next week, you go to a hospital, and to your astonishment, you see every doctor there is peddling the same thing. At this point you start to wonder are you going crazy or the world is. You come home, turn on a TV and see every TV station, every anchor, every pundit, even Surgeon General is talking about it, promoting it. You finally realize it must be you, and decide to give in and go for it. And you would be in a good company, you think, as every friend, every neighbor, every in-law, everyone you ever met even is telling you the same thing: they are doing it.

You see where I am going with this parallel: can you really blame the little guy for this mass delusion? Was there ever anyone to stand up and warn everybody, especially the little guy, that this must be a lunacy? Any pundit? Any politician? Any Republican or any Democrat? Anyone?

Good analogy, Slobodan. I don't disagree with it. This is the human condition. We tend to be subservient to authority, especially on matters we don't understand.

It cuts across all areas of human activity from the beginning of civilization to the present day. There are those who rule, who put on priestly airs and pretend to be divine, and those who pretend to be clueless, or are conditioned to be clueless in their upbringing.

In the modern era there are those who are academically qualified in a particular area, and whose opinion must therefore be considered sacrosanct, and those who recognise the marvelous encyclopedia of the internet which allows them to check the facts and who may also have some appreciation of the history of ideas and the history of scientific endeavour, and who have a bit nous, like me.

Whilst we should always be subservient to principles of justice, equality, fair play, and friendly behaviour etc, we should not be subservient to anything that simply does not make sense, whether it's a recommendation from one's family doctor, one's banker or one's investment advisor.

This is the way forward for the human race. Education and individual responsibility for everyone, not just the little guy.

What was the problem was the unregulated "shadow" banking system where the markets for instruments like "credit default swaps" grew exponentially and totally unregulated ... because they were neither securities nor insurance products ... (yeah, right.)

Mortgage excess was and is real, but that's not the real issue that sent the world's financial system into a tailspin.

I think that you are missing the point entirely. My point is that both sides are to blame in the matter. The buyer of a mortgage that they can not possibly pay in full according to the terms agreed to are lacking common sense, responsibility, and self-control. The financial professionals that offers such a mortgage knowing that the borrower apparently does not have the means to pay the mortgage in full according to the terms agreed to are irresponsible, immoral, and also lacking self-control. Both sides are dishonest: Both to themselves as well as to each other.

I think that the financial professionals have greater responsibility since they are professionals. The customer usually has trust in the professional....sort of like the same trust a patient has in the doctor. But, at some point, even the patient has to assume responsibility for their own health. Common sense should enter the equation.

The medical analogy is very interesting and happens to the area in which I really am qualified.I would suggest that it would only be a fellow physician that would have any hope of untangling what can be incredibly complex clinical details and making enough sense out of them to know what to do.As a physician my job is take that complexity and decode it into much more simple information and propositions that the patient (or family, or power of attorney) can actually follow and take action on.The physician can and does influence what the patient is told and often the decision that is subsequently made.The best physicians can honestly and openly put the situation and sometimes several different treatment options to the patient without letting their biases or communication issues fog the issue, but it is difficult.

To reflect this back to the position of the investor, even an individual such as myself who is not financially unsophisticated (decode that as someone who knows enough to know that he can't possibly understand the fine detail of complex financial products) good advice is essential.In retrospect now anyone can see that the sub-prime mortgage scheme cooked up by Bill Clinton could never possibly fly - it was just a gigantic ponze scheme - despite the best intentions of the legislation which was designed to make to try and make responsible homeowners out of America's poor.It is true that no-one anticipated so many mortgage-holders just handing the keys back to the bank when things got tough - but how anyone thought that unemployed and poor individuals would ever be able to service these mortgages with their steadily rising financial obligations is beyond me.However the whole scheme was marketed from the President down to the local banks and mortgage brokers.

Banks in two countries that I have direct knowledge of - Australia and South Africa - refused to expose themselves to these products as best they could and exited the GFC in fine shape. (Actually in humble opinion the GFC is not over but only just beginning, but time will tell.)Unfortunately many banks (and countries) had unavoidable exposure to the big American banking houses and when the house of cards came tumbling down the process was viciously accelerated by all the financial houses calling in their debt. The rest is history with whole banks and countries becoming bankrupt overnight.

There is no doubt that several pieces of legislation promulgated in the USA dealing with how banks and other financial institutions were allowed to do business led to this disaster. In addition international business means that certain things needed to change in other countries too in order to allow other nations and their businesses including banks to deal with the USA and their businesses and banks.Another incorrect assumption was made that the banks would conduct their business dealings wisely and responsibly. We now know VERY differently.

So, to suggest that the individual poor sod in the USA who was offered a sub-prime mortgage should have known better is correct but only in a very limited sense. This whole thing was pushed as a massive industry.Politicians, central bankers, and commercial bankers should hang their heads in shame.

What do you THINK we disagree about? I get the impression you haven't actually understood (or perhaps even read) anything I have written.

I haven't really weighed into the debate you've been having about borrowers and lenders and at whose feet one should lay blame for the financial crisis .... Because ...

I've been trying to point out that bad loans at the retail level were not actually the cause of the crisis.

Is that what you disagree with me about or are you just trying to be cute and clever?

I have read and have understood what you have written. The bad loans at the retail level may not have been the actual cause of the crisis, but I think that they must have been part of of the equation. I have not at any point stated that you were wrong. I think that we have been talking about two different subjects. I disagree with your statement that I am missing the point entirely. Maybe I was missing your point, but I have not missed my point. And my point (once again, in more general terms) is that the blame cannot be laid only at the feet of the financial industry. Bad decisions were made on both sides of the table.

Bryan, you have to understand that there exists a mentality that will always preclude the so-called little guy from responsiblity for his actions. It's a form of hoping that ignorance of the law will actually be protection from the law, which it never is.

Personal responsiblˇity is always key; where the individual proves he can't accept that, he should be prevented from acting in a manner that can only result in his dropping either himself or others in a cesspit. Too late, I fear.

I find the idea that a Joe Schmoe is responsible for the biggest financial crisis since the Great Depression mind boggling, to put it mildly. It is like accusing kindergarteners for failures of a nation's educational system. It is like not seeing the forest for the trees. It is like not being able to raise above the analysis of the isolated, individual cases, where common sense and personal responsibility are indeed key.

Most would certainly agree that spending beyond one's means, in general and over a prolonged period, is certainly not prudent, smart and responsible. And, on an individual level, it would be hard not to agree with it. But, and this is a big one, when the whole nation does that, as Americans do, is it still only a matter of individual responsibility? When it is considered un-American and unpatriotic not to "shop till you drop," "keep up with the Joneses," buy newer, bigger, better. When "spend, spend, spend" is considered as patriotic as apple pie, is it still just a matter of individual responsibility? Oftentimes, what is common sensical and individually responsible behavior is not necessarily the most beneficial for the group/system as a whole (for theoretical underpinning, see the work of the Nobel Prize Laureate John Nash - or see the movie The Beautiful Mind with Russell Crowe)

If you build a huge building on a shaky foundation and you knew about it, whose fault is it when the building collapses? The foundation's?

If only the irresponsible Joe Schmoe did not default, or if only bankers knew he would do it... everything would be fine, right? But the problem is, Masters of the Universe (read: bankers) not only knew he is going to do it, they counted on it. Their PhD whores built sophisticated risk-analysis models to work around those expected defaults. They packed it and repacked it, combined, sliced and diced it, until the risk became unrecognizable and smelled so good it could be sold to the next sucker. And that next sucker could not care less about the risk as he knew he would sell it to the even bigger sucker, each pocketing the bonuses along the way. So, Joe Schmoe's single mortgage got packed and repacked, sold and resold, so many times, intertwined with so many other PdD-supported products, leveraged so high, that when he defaulted (as expected), the effect was hundred, thousand times bigger than if it were just him and his banker.

So, in conclusion, it is not that his default brought the system to its knees. Turns out, PhD models* were simply wrong... ooops!

But sure, blame it on Joe Schmoe.

* If I remember correctly, one of those guys hoped to get the next Nobel Prize for his risk models... I am sure he is currently "exploring other career opportunities"